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Once a member insurer becomes insolvent and is designated as an impaired insurer by the Commissioner of Insurance, TPCIGA becomes responsible for processing its "covered claims." Claim files from the insolvent company are forwarded to the TPCIGA so that we can begin handling the claims. There are inevitably some delays in claims handling when a carrier becomes insolvent; however, we try very hard to ensure that worker's compensation payments are not delayed, and we review all claims as quickly as possible.
Covered claims are defined in TPCIGA's statute, found at Chapter 462 of the Texas Insurance Code. Generally, a covered claim includes the full amount of statutory worker's compensation benefits arising from a worker's compensation policy. All other types of claims are subject to a statutory cap, which is currently $300,000 or the limits of the insurance policy, whichever is less. A covered claim may also include unearned premium, or that part of the premium paid in advance and unearned at the time the policy is canceled, up to a $25,000 limit.
TPCIGA is considered the "insurer of last resort," and there are a number of limitations on claims that we can pay. TPCIGA does not pay claims for punitive damages, including claims under the employer liability portion of a worker's compensation policy. We also do not pay claims for bad faith, interest, or penalties. In addition, claimants must exhaust any other forms of insurance that may cover their claim before obtaining payment from TPCIGA. For a complete description of both covered claims and excluded claims, please refer to our statute.
TPCIGA has the duty to defend insureds under a liability policy, as long as there is no other insurance coverage that would provide a defense, and provided that the lawsuit seeks recovery of a covered claim. When an insurer becomes impaired, all Texas court proceedings in which the company is obligated to defend a party or is itself a party are automatically stayed for at least six months. This allows the TPCIGA time to obtain the files from the Receiver, review the claims and, if necessary, retain attorneys to continue the litigation.
Information on this site is not legal advice and is not intended to be a comprehensive statement of the law or of the TPCIGA's policies and procedures. References to the laws of any jurisdiction are for informational purposes only and are not a substitute for the official version of a statute. TPCIGA makes no warranty as to the accuracy or reliability of the content of this website or other related websites.
© 2010 by Texas Property and Casualty Insurance Guaranty Association